Yen Consolidates After Recent Losses
It is possible that the move that dominated the capital markets during the first 6-weeks is coming to an end. Riskier assets gain traction toward the end of last week even despite the worse than expected non-farm payroll headline reading. The yen, which is sometimes seen as a safe haven during volatile times, weakened, and is now consolidating recent losses against the greenback.
Meanwhile, Japan’s current-account deficit widened to a record 638.6 billion yen in December from 592.8 billion in November, partly due to surging imports and the weak yen. Consensus was for 685.4 billion yen. The fear is that the deficit will become permanent and hurt investor confidence in Japan which would be rather dangerous given the country’s massive debt.
In central bank news, The People’s Bank of China is prepared to tolerate reasonable volatility in money-market interest rates as it attempts to rein in soaring debt in the country. While the PBOC will ensure appropriate liquidity, it won’t fund growth that is dependent on investment and debt. The PBOC’s remarks come after repurchase rates spiked to high levels at various points over the past several months, causing ructions in stock markets.
The USDJPY consolidated near support which is seen at the 10-day moving average. Additionally support is seen near the recent lows at 100.80. Resistance is seen near the recent highs at 105. Momentum is turning positive and the MACD (moving average convergence divergence) index is poised to generate a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The RSI (relative strength index) is moving higher with price action reflecting accelerating positive momentum printing near 44 which is in the middle of the neutral range.
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